Credit score shouldn't be a driving issue for auto insurance

An excerpt from an editorial in the Daily Times about how auto insurance companies use credit scoring to determine insurance premiums and insurability for car drivers:

"You could be one credit reporting error away from disaster.

There is a business practice used by many insurance companies that could put you on the road to ruin. It's the use of credit scoring to determine how much you pay for your policy premium for auto and homeowners' insurance.

This week, I talked to two of the most reputable insurance companies doing business in Delaware in an effort to understand why they would penalize a policy holder with a low credit score by making them pay a higher premium. One of those companies is my own.

David Fetterman of Nationwide said, 'I do support it because those people who have credit problems have a larger tendency to have problems keeping their insurance paid and with issues of reliability.'

Cristy Cote of the Progressive Group of Insurance Companies said, 'Credit has proven to be a very powerful and independent predictor of future loss,' adding that the practice is supported by the company's data and research from a number of different groups.

Both Nationwide and Progressive said that credit scoring is one of several factors, including driving history and vehicle type. Both companies denied that it is a punitive measure against poorer customers. They see the practice not as a penalty against the customer with bad credit but a reward for the ones with good credit.

It makes no sense to me. Low insurance premiums are the reward for good driving. It should not matter if the driver is rich or poor."

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